In Lieu Of My Own Content, Allow Me To Make Fun Of Someone Else’s

Recently, one of my readers made me aware of a post from a blog called Work Save Live, where a reader wrote in and asked the author’s opinion of her budget and her financial situation. Normally this types of post bores the crap out of me, since it’s either from somebody who has disaster finances, or from someone who loves their budget so much that they want an intellectual masturbation partner.

This post though, was different. It contained so many suggestions that were, well, the opposite of right. We’re gonna have to delve right in. Take it away, Captain Wrong: (I have been informed his real name is Jason)

I love the fact that they already had things broken down into this amount of detail. It speaks volumes that they have no consumer debt and have a decent amount already saved for emergencies.

The people in question have $9000 worth of assets and $40k worth of debt. It “speaks volumes” that they have a negative $31k net worth? This guy must be easily impressed or something.

I’ll give them credit, they’ve paid down some debt. But to fellate them to this degree after accomplishing a little is like entering your 6 year old in the Tour de France right after you take off his training wheels. (Cycling! Topical!)

Furthermore, the fact that they have a goal of traveling and are saving towards that end shows they’re organized, disciplined, and are willing to sacrifice to meet those goals.

Jeez, this guy sure does kiss reader ass, huh?

“Not only are my readers all attractive, but their penises are GIGANTIC. Oh, and their tears cure Leprosy in starving African children.”

Tithe – the fact that they believe in giving, and particularly giving to a local church, is a tremendous thing. Considering their disposable income and the flexibility they have, I’d encourage to give a little more sacrificially.

Great start, dumbass author. Maybe they should get that net worth back to zero before going nuts with the tithing? You know, take care of their own finances before worrying about other people’s. But then again, I may be biased against the tithing.

Life Insurance – now that they’re married it’s a great time for them to consider getting life insurance.

Really? Even though they have no dependents?

Look at getting a 20 or 30-year term policy for $450,000 for income earner #1 and $600,000 on income earner #2.

Nope. Unnecessary expense.

While it’s possible that each of them could live off of their own incomes (if something were to happen to the other), reality is that they’ll get used to living off both incomes and they’ll be taking on debt in a few years in the form of a mortgage.

Buying life insurance now to cover for a hypothetical mortgage they might get in a few years is a terrific idea. Do you know why? Because flushing money down the toilet would take too long, and this way they can waste money more efficiently. It’s genius, really.

Why do people insist on buying life insurance when they have no dependents? Sure, there’s a tiny risk that you’ll be uninsurable in the future, but I’d worry about things more likely to happen. Like being the starting center fielder for the Chicago Cubs. Or me actually getting a girlfriend.

Term life is exceptionally cheap and I believe $75/month (total) is about right. I imagine they could do better assuming they’re healthy and neither of them smoke.

Hey, do you know what’s $75/month cheaper? NOT GETTING LIFE INSURANCE UNTIL YOU HAVE DEPENDENTS.

Based on our conversation I believe they’ll find employment, prior to the wife’s company moving, without an issue. However, it’s always nice (and wise) to have the added protection of an emergency fund in case things don’t turn out as planned.

With that in mind, I’d have a goal of saving a total of 6-months worth of living expenses and build up your emergency fund to a total of $22,000.

Hold on a second.

(Finds kitten hobo, strangles it)

22 thousand dollars sitting in an emergency fund when they owe 40 thousand dollars in student loans. Did this guy graduate from the Finance Fox school of personal finance? (Located in Wrong, Ontario) Wait, I forgot. It’s wrong for me to assume PF bloggers should know basic accounting.

The reason I suggest doing this and delaying paying extra on debt is for two reasons: (1) there is a storm brewing…they’re not sure if it will be a hurricane or just a little thunderstorm, and (2) if they secure employment shortly before (or after) the wife leaves her job, then they’ll have a LARGE stash of cash that they can pay down towards debt.

They have a whole year for the wife to find a new job. Plus, assuming she’s the lower income earner (making $2900 per month), they can probably survive on the $3800 a month the husband makes. And, he’s in no danger of losing his job. Plus there’s like a thousand bucks a month for things like tithing and saving for vacations. There’s plenty of fat they can cut if she can’t find a job.

But no, go ahead and sit on a giant pile of cash that they’ll never use. Maybe they can earn 1.1% interest on it, rather than using it to pay off student loans at 5%. (I’m just assuming the exact rate here) If they could only find a way to do that with a MILLION DOLLARS, THEY’D BE RICH!

Once they’ve determined exactly how much they need for the trip, I’d then take all of the disposable income each month ($2700 in addition to the $250 already being saved) and add it to the vacation fund. At month 7 of this plan, they’ll have $4,450 saved and at the end of month 8 they will have $7,400. I’m not sure how much it’ll cost, but $7.5k should be close to enough.

DAMMMITTTT

If I was in charge of the PF-sphere, I’d automatically shut down the blog of anyone who says it’s okay to go on an expensive vacation before paying off debt. These people could get rid of their debt in like a year if they were serious about it. Then they could spend like 3 months saving up for this holiday, and enjoy a holiday while being debt free. A year. That’s it. Are we so impatient that we can’t even wait a year to take care of business before taking a dream vacation?

3. Rock That Debt

With the emergency fund sitting at $22,000 thousand dollars (in 6 months) and the vacation fund completed, they’ve now freed up all of that money they were saving and will have a disposable income of $2,950/month.

I can’t keep going. This dude is just so stupid.

Here’s what gets me about this whole thing. All the commenters agree with him. Of course they do, because it’s all Yakezie groupthink. But still.

They all think this couple deserves some expensive exotic vacation. They’ve been out of college for all of 6 frickin months. For God’s sake, maybe it’s time to buckle down and work a little? What happened to waiting to do things? These dumbasses all think it’s okay to work a little toward paying off the debt, then taking a very expensive break, and then finishing. Shouldn’t the vacation be the reward for paying off the debt? Wouldn’t that make said vacation much sweeter? Am I the only person in the world who thinks they should accomplish something before taking a GODDAMN DREAM VACATION?

If anybody wonders why there are bruises on my forehead, it’s because I’ll be spending the next two hours banging my head against the wall.

Maybe the blog writer sells life insurance? I find that many of the advice offered in newspapers (Globe and Mail Financial Facelift series ) comes from people who make money from selling financial service products.

I am a dog lover and don’t care much for kittens but maybe next time you have a lot of financial frustration to deal with you could hunt down a mutual fund salesperson instead of picking on a kitten.

Are you o.k. Nelson? Be a shame to lose the number 1 PF blogger out there. I hadn’t told you that in a few months and you haven’t told people you don’t pay me to say so…. So I felt a reminder was due after that tirade….

“Idiocracy” rules these days. Don’t hurt yourself. Common sense has left the building…

ok wow. First of all, they’re spending over $4000 a month? Without a mortgage? And $4000 x 6m is more than $22000. Just, you know, basic math.

Vacation rant: $7500!?!?!?! SEVEN THOUSAND dollars on a vacation?! I could travel for a year on 10k, so I can’t imagine what kind of vacation would cost SEVEN THOUSAND DOLLARS. That’s the paragraph that made my head explode.

I got their budget down to less than $2000 per month without sacrificing too much. Why does his wife need to gas up her car? Why does she need fun money? Why are they eating in restaurants!? If they spend $2000 per month and he earns $3800 per month, she can *stay unemployed* and they will still pay off their debt in under 2 years. When she gets a job, their repayment will go faster. Bleh.

Nelson, I think you’re going a little overboard on the vacation before debt-payoff thing. I do agree that $7,500 is way too much to spend on a vacation when you have no net worth. BUT, being debt free is not the be-all end-all. If it were, then your advice should extend to any and all discretionary spending, not just vacation spending. For this couple, there should be a happy medium which can include having some fun now and then without needing to “accomplish” getting rid of all their student loan debt.

I’ve got about $10k remaining in student loan debt and far more than that in cash sitting in a bank, and am happy to continue paying the minimum balance. The interest rate is under 2%. I also have 3 rental property mortgages for which I also have little interest in accelerating payoff. In the meantime, I go on vacations. I have hobbies. I give money (a heck of a lot more than 10%). I have a healthy net worth, and save about half of my wife and my combined take-home toward new investments. Should I live like a pauper because I have debt?

I agree with M+M here. I was trying to look for the right words to reply with similar thoughts. There is good debt and bad debt. Your 3 rental properties being your long term goal strategy create tax deductions for you. This would be good debt. This should bring positive income streams one day to you. It sounds like you have a base of equity and are in a better position then the couple in the article.

They seem just like your averge joe type couple that are looking for a makeover and did not really know where they stood before this budget was constructed for them. Nelson has his own “special” way of making his points. “Harsh” is just warming up for him :). Personally I also would suggest a cheaper but nice vacation (maybe a cruise with 4 or 5 island “stop-over’s” you could do that nicely for 3K), pay down those debt’s so they get to a positive cash flow position before doing an expensive European vacation. I would have trouble sleeping if I had ANY other debt except mortgage debt. (Which I no longer have either, I paid that down as fast and methodically as I could). My income now for me now is all investment money or its all “fun money” (after my basic living expenses) as they called it. (FU money for some).

It’s such a nice feeling to not owe any money. Also to wake up every day knowing if you lost your job or something else bad happens that you will be just fine. Did I sacrifice a few years to be in this position? Yes, but I’m also young enough to still enjoy it and I have for a few years now.

I do understand some people worry that if they don’t do something now they will never get a chance to do it later? (maybe they want to start a familly so they want to do this before that?) We are talking a trip to Europe here… I have been to Germany, France, Austria, and U.K. It will still be there in a few years and just as enjoyable. Life is a trade off – you have to be comfortable with your choices and also live with them.

1. If you go on a holiday while still in debt, you are borrowing to fund that holiday. So not only is someone consuming, they’re borrowing to do so. That’s bad. Leveraging to buy appreciating assets is good. Leveraging to go on holidays is the exact opposite of good.

2. You do realize interest rates are going up at some point, right? Paying off debt when interest rates are low is a good move, since it lessens the interest expense later.

Considering you talk about ultra-low rates on your student loans, I’m assuming you’re Canadian. I hope you don’t own rental condos in Toronto or Vancouver.

Not Canadian – I guess I just graduated at the right time (2006) as I believe I read that most more recent student loans are in the 6% range. I don’t know why mine are so low, but I’m taking full advantage!

1. Also – sure, I agree that all my spending is technically “financed” because it could be used to pay off debt, but I don’t agree that’s NECESSARILY bad. Obviously it depends on the situation and I’m inclined to think that in my situation it’s not bad.

2. Paying off VARIABLE RATE debt when interest rates are low can be a good idea. Mine’s fixed (except about $2,500 in student loans, at under 2%). However, it’s an even better idea in my opinion to keep the low interest debt if you can make more in investments in the meantime, such that you could cash out the investment and pay off the debt should the rates jump up.

Who takes a $7.5K vacation when you’re $40K in the hole? Somebody give these people a shake. Vacations are privileges not some god-given right. I’d be telling these people if they want a vacation, pitch a tent in the yard. When they pay off that debt, then maybe save some cash up and reward themselves with a reasonably-priced vacation.

What works for you and is your priority is not necessarily the same for another.
Yes, this couple has a fair bit of spending/budget detail compared to many, many people. Especially if they have never really looked at it before. Could they do more? Sure, but they’re already starting ahead of lots of others.
If you don’t understand tithing, then you don’t. Consider it a non negotiable user-fee and move on. Note that later on in the post he offers a few different thoughts on tithing amounts and timing.
Life insurance… whatever. $75 seems steep. I have seen the uninsurable case before. It truly sucks for people.
Employment. You don’t know these people and have absolutely no idea how likely they are to be able to: get another job, have access to credit. So what do you propose for the scenario where she is unable to find work, they have to relocate, but now their budget is down to the wire and they can’t afford it, plus no one will give them any new credit? Unlikely, yes, but once debt is paid off, you don’t have that cash, it’s gone. Many large corporations in North America are also sitting on giant piles of cash, for good reasons.
Vacation cost – we don’t know where they live. Some of the people above who have commented on the cost of their vacations live next to major hub airports. Not all of us do. Note that they want to go to Europe, it is rather expensive there. As long as they acknowledge that the vacation is on borrowed dime, it’s their decision. We also don’t know what their vacation schedules look like, so there’s a chance that timing dictates when they will have the opportunity to go on vacation.
Nowhere in the article does it mention what rates they are paying on their debt, we don’t know. We also don’t know if their retirement savings are an employer match or not, so redirecting may be a bad idea. We don’t know how far away they moved in the past few months from their previous residence, so maybe a category like their clothing budget has to take into account buying winter clothes they’ve never owned before. The travel budget may also include a trip back to their families at some point in the year.
Yes, anyone can stop eating in restaurants or spending any money, but to what end? Life is all about balance. With barely any changes, they’re on track to be debt free and on vacation in two years, or ballpark 3 years out of school, after paying for at least part of a wedding, plus moving costs. They’re still well ahead of the curve. Could they do things differently to expedite the process? Sure. Is it absolutely necessary or crucial? No.
Vitriol riles up the masses, but your disagreement and alternative suggestions would be much better received if presented in another form.

Yes, and therein lies the problem with all the “help me with my budget” posts. The readers who write in only provide bits of their situation and, because they don’t have blogs themselves, have no readers to hold them accountable (and, likely, don’t even read the comments on the post itself). I ran into this situation when I did one of these budget posts for someone awhile back :/

If the couple had gone to an actual financial planner they would have had to present a TON of documents and would have spent hours with the advisor to get an accurate picture of where they were in life and where they wanted to go.

Indeed. Though there was mostly head-nodding in the comments 🙂 Asking lots of questions in the comments (ASSUMING THEY’RE READ!) can lead to some productive discussions.
Not every actual financial planner can achieve decent outcomes either 🙁 I had a job offer from some of the companies and actively tell people not to use their services!!

1. If you go back to the tithing post I linked to, a full 94% of people who go to church regularly never give the church a dime. Delaying tithing is perfectly acceptable.

2. The woman writing in is confident she’ll find another job. Accounting is in demand. Plus, as Vanessa said, they can easily live on the other income.

3. “As long as they acknowledge that the vacation is on borrowed dime, it’s their decision.” Nope. I refuse to enable people to make foolish financial decisions. This is a wealth creation blog. It isn’t a “justify bad financial decision” blog.

>>>>Life insurance… whatever. $75 seems steep. I have seen the uninsurable case before. It truly sucks for people.

Yes, it sucks – big time. It’s almost life altering in some cases. I agree wholeheartedly.

The question though, is are you prepared to spend $75 a month now, to insure yourself against becoming uninsurable in a few years? It’s a risk, but is it one you’re willing to cover at $75/month? When you scare someone, they might do this. When you put it as simply as $75 a month so you can buy insurance in 3 years (i.e. insurance so you can buy insurance), most people won’t.

Nelson’s black and white response to this isn’t entirely correct either, because the answer is that most people won’t spend $75/month. But some will. Folks that have a heightened perceived value of life insurance would consider this – folks who have hereditary conditions in the family. Folks who’ve seen someone become uninsurable firsthand. Insurance brokers such as myself who see this routinely. And yes, people who’ve had that perceived value heightened through emotional scare tactics.

I usually don’t read the articles on your blog, but just subscribe for the pictures, but the title caught my eye.

I have to agree with you 100% on the life insurance and vacation thing. I am planning on taking a vacation this coming December and will spend about $7500, but that is for a cruise for a family of 8. Now, yes, I do have some debt but do have a positive net worth.

The concept of a tithe makes me shake my head. I don’t think its bright to expect someone to contribute their own hard earned cash just because they believe in a religion. Sounds more like a cult to me. It should absolutely not be a priority if you’re in debt. Plus, 10% is higher than a lot of savings rates I’ve seen. Why not save the money! I won’t even start on a $7500 vacation.

A little harsh, Nelson, though I do agree with you 100% on tithing. I think it’s wise to assume that no one is going to take care of you when you’re older, therefore you should be financially free before taking care of other people. I donate some each year, though certainly not 10% of my income. If I find myself financially free at an older age, I’d have no problem giving away 50% of my income if I could. For now, though, I think I have to assume that no one will take care of me and taking care of myself comes first.